President Bush’s tax cut proposals would give real North Carolinians the significant tax relief they deserve. While big government proponents label it a “tax cut for the rich,” in reality, all taxpayers would benefit from across-the-board cuts in marginal rates. In fact, under Bush’s proposal the richest Americans would shoulder a slightly higher percentage of the overall tax burden.
This means, everyday North Carolinians would be able to keep more of their hard-earned money. According to a Heritage Foundation study, the average family of four in North Carolina makes $36,985 and pays $1,765 annually in federal income taxes. However, after Bush’s tax cut is fully implemented, their federal tax burden would be just $165. That’s a savings of $1,600 or 90.6 percent. That’s a lot of money for a family who is struggling to pay rising energy bills, save for college tuition, and put away money for retirement.
The tax relief in this example is a result of both an across-the-board cut in marginal rates, and a doubling of the child tax credit from $500 to $1,000. Under the plan, the five rates of our current tax code would be replaced with four lower ones. This ensures that every American who pays taxes gets tax relief.
In fact, the lowest income taxpayers would receive the largest cuts in marginal tax rates, making it significantly easier to build wealth and join the middle class. Currently, a single parent of two earning between $22,000 and $30,800 pays a higher marginal tax rate than a businessman earning $250,000. But under Bush’s plan, the marginal rate for this parent would be reduced from 36.1 percent to 21.1 percent – significantly lower than that of the wealthier businessman.
Furthermore, implementing Bush’s tax cut proposal is the equivalent of giving hard-working North Carolinians a pay raise. For example, the mean income of a teacher in North Carolina is $36,883. If a single teacher at this salary had two children – even after taking the child tax credit – she would pay $2,305 in federal taxes. However, by doubling the child tax credit and cutting marginal tax rates per Bush’s proposal, this teacher would keep $1,500. That is equivalent to a 4.5 percent increase in take-home pay. At a time when our state faces a budget crunch, this would give North Carolina’s teachers a pay raise without appropriating additional funds from the education budget.
These numbers, however, include only the proposed cuts in marginal tax rates and doubling of the child tax credit. The proposed reduction of the marriage penalty would further cut taxes for many North Carolina families. This would allow dual-income families to deduct up to $3,000 from their federal tax burden. The complete Bush plan, fully phased in and including marriage penalty relief, would increase the disposable income of the average American family of four by $4,680 in 2011 (adjusted for inflation). Over the next ten years, the average North Carolina household would save a total of $12,372 in federal taxes.
Clearly, these tax cuts are pro-growth and pro-family. Across-the-board tax relief is fair, honest, and simple and would significantly reduce the tax burden on North Carolina families. Now that taxes are higher than they’ve ever been in peacetime and our federal government has massive budget surpluses, it’s time to give something back to hard-working taxpayers. As President Bush has said many times, “the surplus is not the government’s money, it’s the people’s money.” Now is the time for Congress and the President to return the people’s money to the people.